U.S. retail sales unexpectedly recorded a significant increase in June as demand for goods remained strong despite spending shifting to services. This indirectly carries an indication that economic growth will pick up in the second quarter.
Retail sales jumped 0.6% last month based on a Commerce Department report on Friday. The revalued May data showed the retail sales reading fell 1.7% instead of falling 1.3% as previously reported.
Economists on the other hand even predicted retail sales to decline 0.4%. According to Veronica Clark, an economist at Citigroup (NYSE: C) in New York, it is expected that supply problems and declining auto inventory will continue to limit vehicle sales in the coming months.
Demand shifted to goods such as electronics and motor vehicles during the pandemic outbreak due to work from home. Spending is now shifting to services like travel and entertainment, with at least 160 million Americans fully vaccinated against COVID-19.
Thus Kevin Cummins (NYSE: CMI), head of U.S. economics at NatWest argues that with the reopening of the economy, spending on services is starting to increase and can make consumers shift from spending on goods to services.
Economists expect consumer spending, which accounts for more than two -thirds of U.S. economic activity, to record double -digit growth in the second quarter. Consumer spending increased at an annual rate of 11.4% in the first quarter.
GDP is estimated to grow 9% in the second quarter from 6.4% achieved in the first quarter.
